channel stuffing


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Channel Stuffing

An illegal practice in which a company willfully sells more of its product to distributors than the distributors can sell to customers. The company makes these sales on credit, which temporarily boosts its accounts receivable and by extension its current assets. This makes the company look healthier than it really is which can raise its stock price. Eventually, when the distributors are unable to sell the product they return it to the company instead of paying, which reduces the accounts receivable and brings the company's balance sheet in line with reality.

channel stuffing

Artificially inflating current sales and earnings by shipping more goods than would normally be ordered. For example, an appliance manufacturer may inflate revenues and earnings in the current accounting period by shipping to retail stores more refrigerators, stoves, and dishwashers than the stores are likely to sell. The practice of channel stuffing borrows revenues and earnings from the future because overstocked customers will reduce orders in future periods.
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After a short report alleged that STAAR Surgical engaged in channel stuffing with their distributor in China, Benchmark analyst Bruce Jackson stated that he believes the allegations are unlikely.
Attorneys for PSG and former CEOs Davis and Rosenthal ask charges of channel stuffing be dismissed, saying it was a legal "agressive sales campaign."
According to the complaint, the results reflected "channel stuffing," in which Monster would provide Anheuser distributors with too many drinks to sell, at times up to a year's worth of inventory, even though Anheuser had "practically abandoned" distribution of the Allied product line.
Acer has written off huge inventory in the past and there have been reports about channel stuffing. How do you plan to win the confidence of the channel again?
(b) The practice of encouraging customers to purchase more than they can use, often by offering deep discounts or extending payment terms, to prop up current earnings is known as channel stuffing. Often, the purchasers return the excess goods later after the company has recorded the profits from the sale.
* head of sales (ask if there are any side deals with any customers, channel stuffing, so called "round-trip" sales, etc.);
It's a revenue recognition case alleging that channel stuffing, side deals and other arrangements artificially inflated revenue.
For example, many securities class actions include allegations of accounting irregularities, including improper revenue recognition schemes or alleged "channel stuffing." Channel stuffing occurs when a company induces retailers along its distribution channel to substantially increase their purchases before they would, in the normal course, otherwise purchase products from a company.
Some manufacturers will continue their traditional product push cycle of long production runs and channel stuffing. Others will acquiesce and make more private label products to keep their plants at maximum efficiency and their branded products on the retailers' shelves.
Securities and Exchange Commission in Atlanta are looking at whether Coca-Cola engaged in ''channel stuffing'' with Japan's Takasago International Corp., a global supplier of flavors and fragrances.
Common fraud techniques include certain "channel stuffing" (for example, shipping inventory in excess of orders, or providing special incentives to customers to purchase more inventory than is now needed, in exchange for future discounts and other benefits), reporting revenue after goods are ordered but before they are shipped, improper year-end cutoff procedures, reporting revenue when significant services are still to be performed or goods delivered, and improper use of the percentage-of-completion method.